Local content case studies, 2016 - IPIECA

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Local content Case studies Social responsibility THE GLOBAL OIL AND GAS INDUSTRY ASSOCIATION FOR ENVIRONMENTAL AND SOCIAL ISSUES www.ipieca.org

Transcript of Local content case studies, 2016 - IPIECA

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Local contentCase studies

Socialresponsibility

THE GLOBAL OIL AND GASINDUSTRY ASSOCIATIONFOR ENVIRONMENTALAND SOCIAL ISSUES

Socialresponsibility

THE GLOBAL OIL AND GASINDUSTRY ASSOCIATIONFOR ENVIRONMENTALAND SOCIAL ISSUES

www.ipieca.org

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Local contentCase studies

Contents

Skills development programmes 2

Vendor development programmes 4

Strategic and substantial investments with a long-term horizon 7

Local content performance management 11

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2 — Local content: case studies

n CASE STUDY: SKILLS GAP ASSESSMENTS

The Tanzania Vocational Education and Training Authority (VETA), international NGO VSO, andthe five energy companies comprising the Tanzania LNG Project have conducted a collaborativeassessment of Tanzania’s vocational and educational needs in relation to the country’s emerginggas sector. The study assessed the gaps at the lower end of the vocational education and training(VET) system to fill some of the gaps that constrain graduates from accessing semi-skilledemployment opportunities. It identified these gaps by focusing on 13 trade occupations across5 key disciplines relevant to the energy sector, but which are also transferable to other economicsectors: metal; building; civil engineering and infrastructure; and mechanical and electrical works.

Source: VETA/VSO/Tanzania LNG Project (2014)

n CASE STUDY: DEFINING SKILLS COMPETENCY STANDARDS

The Australian Drilling Industry Association was one of the founding members of SkillsDMC, anadvisory body established by the Australian Government to develop and implement skillscompetency standards linked to occupational outcomes that meet the needs of the resourcesand infrastructure industry. SkillsDMC is responsible for defining industry skill specifications,providing best practice workforce planning and development solutions, as well as facilitatingaccess to skills investment programmes. This involves working closely with the resources andinfrastructure industry, governments, employer and employee bodies and communities, as wellas training organizations and industry and training regulators to strive for quality, and for industry-led VET arrangements within the National Training System.

A particular success has been the development of the Australian Resources and InfrastructureIndustry Training Package (Skills Competency Recognition Framework), which has been adoptedby industry and government to support workforce development and skilling strategies.

Source: www.skillsdmc.com.au

n CASE STUDY: INTERVENTIONS AT ALL LEVELS OF EDUCATION, FROMPRIMARY TO POST-GRADUATE

In Mozambique, Eni is implementing a capacity development programme of interventions at alllevels of education, from primary to postgraduate, in partnership with universities, institutionalbodies and local communities.

Some of the key features include:

l Primary education: agreement with the Provincial Department of Education and Culture,the Municipality of Pemba and the Council Community Paquitequete to improve access toprimary education in the district of Paquitequete (Pemba) through the construction of aprimary school, supplying educational materials and conducting awareness-raising activitieson social and environmental issues.

l High-school education: as part of the Eni Students Project, in conjunction with theUniversity College of London, two initiatives were organized in Mozambique (UEM, Maputo

Skills development programmes

Case studies

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and UniLurio, Pemba) involving more than 200 students from high schools in the country.Study days were organized which entailed the selected students spending two days at theuniversity to learn the basic principles about energy and the environment, with a particularfocus on geology.

l Technical education: agreement with the Mozambican Ministry of Labour with the aim ofimproving the quality of training for young people in Pemba through support from thePemba Technical Training Centre, providing educational materials, renewing infrastructure,supplying materials and supporting course delivery, and also through the provision oftraining for teachers and training future trainers of the centre.

l Sector-specific professional training: the ‘200 Training Programme’ aims to select 200talented Mozambican graduates and give them the opportunity to go abroad to take part ina multidisciplinary training programme or on-site professional training in the oil and gassector. To date, 133 students have been involved of which 20 have already been taken on inthe subsidiary. Selection activities are conducted with the support of Eni InternationalResources and Eni Corporate University.

l Partnering with local universities: the ‘Eni Professors @ EMU’ project aims to train 10 juniorprofessors in the field of gas engineering in collaboration with Eduardo Mondlane University(UEM) in Maputo. During the training period the junior professors attend lectures, seminariesand visits (Beijing, Turin, Perugia and Sao Paolo) organized by Eni Corporate University and Eniwith the support of international universities specializing in petroleum and gas engineering.

Source: Eni

n CASE STUDY: KNOWLEDGE TRANSFER FOR TALENT ACCELERATION

Maersk Drilling initiated seven local acceleration programmes focusing on employing, trainingand educating local talent in Angola, aiming at creating an internal pipeline of Angolan talentthat meets the high standards required to operate its 6th generation semi-submersible drillingrig, Maersk Deliverer, and achieve a target of 70% local staff by 2017.

The programmes build on the knowledge and experience gained by experienced offshore crewthroughout their careers and their ability to transfer this knowledge and experience to their newAngolan colleagues. The training curriculum, customized to the operational environment inAngola, combines offshore knowledge with theoretical classroom tuition and on-the-job training.To ensure trainees progress according to plan, monthly performance appraisals are conducted.

Maersk Drilling has collaborated with other Maersk business units operating in Angola, includingMaersk Oil, Maersk Supply Service, Maersk Line, APM Terminals, Svitzer and Damco. Thebusiness units have collaborated on Maersk Line’s ‘African Leadership DevelopmentProgramme’, intended to train top-performing employees to be able to take over futureleadership positions in the Maersk Group.

Source: Maersk Angola

Case studiesSkills development programmes

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n CASE STUDY: PRIORITIZING LOCAL BUSINESSES FOR UPGRADING

One pertinent aspect when conducting firm-level analysis is to differentiate between a qualitygap and a quantity/capacity gap. The former focuses on capability and the latter on the size orvolume of production. The quality-quantity matrix below (Figure 1) depicts a tool applied by theCNOOC, Total E&P and Tullow joint venture in Uganda for prioritizing goods and services fordevelopment considering both dimensions. The assumption is that an intervention for apotential supplier with a high capability gap would be quite different to one with a high capacitygap. The former would be potentially addressed by training, while the latter would be addressedby access to credit to expand facilities or invest in new equipment.

A further level of analysis applied by the CNOOC, Total E&P and Tullow joint venture project toinform the prioritization of local content development opportunities is shown in Figure 2 onpage 5. Each estimated commodity is mapped on two dimensions: the estimated extent ofeffort to develop local content in the commodity, and the extent of local benefits. Thecommodities grouped in the green segment were rated a greater priority for local content dueto their relative ease of implementation in terms of time and resourcing, and extent of localbenefits through employment creation.

Vendor development programmes

Case studies

Figure 1 Mapping of commodities requiring future support

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5 — Local content: case studies

Source: Total. Planning for the future: A demand and supply study on the oil and gas sector in Uganda.

n CASE STUDY: SUPPLIER DIVERSITY

In the USA, resource developers are expected to provide diverse and local constituencies withequitable opportunities to participate in the benefits of economic development from oil and gasoperations. Many resource developers are affected by the Small Business Administrationrequirements for Federal Government contractors.

Chevron’s Supplier Diversity/Small Business Programme promotes an inclusive businessenvironment for the benefit of the company and its suppliers, and consists of:

l Utilization: integrates strategies to include competitive sourcing opportunities.

l Training and education: training and support for small, minority and women-ownedbusinesses on how to do business with Chevron.

l Tracking: monitor and report progress towards achieving the programme targets.

l Certification: verifies that businesses meet the criteria of ownership to qualify as a minority,woman-owned or small disadvantaged firm. Certification workshops, training andpartnerships with recognized certifying organizations help facilitate the process. Programmeparticipants must provide proof of certification from the National Minority DevelopmentCouncil, the Women's Business Enterprise National Council, the U.S. Small BusinessAdministration, and the National Gay and Lesbian Chamber of Commerce.

l Outreach: seeks out diverse suppliers through involvement with small business and minoritydevelopment organizations, and through participation in various trade shows.

Source: Chevron

Case studiesVendor development programmes

Figure 2: Mapping of selected industries according to benefits and feasibility

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n CASE STUDY: COMMUNITY EQUITY OWNERSHIP IN SUPPLIER FIRMS

Petroleum Development Oman’s (PDO’s) Local Community Contractors (LCCs) programme aimsto share the benefits of its operations with the local community by engaging LCCs throughcontract work. There are two types of LCCs: Al Ahliya and Private. Al Ahliya LCCs comprisecompanies that have been set up along tribal lines in consultation with the Ministry of Oil andGas, local government authorities and tribal sheikhs. The ownership of a given Al Ahliyacompany is open to any member of the corresponding tribe. Private LLCs comprise those LCCsthat are not of the Al Ahliya type. Al Ahliya LCCs may be subcontracted by PDO maincontractors via inter-bidding process. Private LCCs are restricted to accepting work in theirgeographical base.

PDO also supports local business development driven by the government, in the form of SuperLocal Community Contractors (SLCCs). These are Omani businesses that have shareholders, allfrom within PDO’s concession area, and are registered as closed Omani shareholding companieson the Muscat Securities Market. The SLCCs—Al Baraka Oilfield Services, Al-Shawamikh OilServices, Al Sahari, Al Khazain and Al Haditha Oil Services—were selected for their internationalreach, capital base and complexity.

PDO has established a team to help SLCCs identify and develop business opportunities. Inaddition to the allocation of contracts, the company has provided dedicated support to theSLCCs, including:

l appointing a business consultant to guide them in developing their business plans andsetting up HSE and management systems that meet industry standards;

l sending PDO’s experienced staff members to each of the companies to help them betterunderstand oil and gas operations;

l training Omanis living in the concession area so that they are suitably skilled foremployment by SLCCs;

l allocating industrial plots and workshops at PDO-owned locations; and

l purchasing all the necessary equipment to execute the assigned work.

Source: PDO

n CASE STUDY: ACCESS TO FINANCE

One of the barriers to the expansion of production capacity of the domestic industry in Brazil, aswell as to new investments in research and development, is the difficulty, especially for SMEs, inobtaining finance due to the high cost of capital from the private banking sector. In order tofacilitate credit for domestic suppliers, the Program for the Mobilization of the National Industryof Oil and Natural Gas (PROMINP) supported the structuring of new financing mechanisms andcapitalization of the production chain through collaboration with public and private banks. Threemechanisms are highlighted below:

l Progredir Program: in conjunction with Petrobras and the 11 large banks in Brazil, thisprogramme aims to make available credit—with competitive conditions—to the Petrobrassupply chain (contractors and subcontractors). It also aims to improve liquidity and financial

Case studiesVendor development programmes

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strength of these companies in their operations. The receivables of contracts andperformance information are used as a way to mitigate supplier credit risk. This informationis made available on the programme website and can be accessed by Petrobras,participating banks and the enterprises themselves, who have the opportunity to extend thebenefits of the programme to their own suppliers.

l BNDES P&G (Petroleo e Gas): a special line of credit to foster research and developmentand innovation, to increase local content, increase supplier capacity and capability, reduceproduction gaps, and reduce costs to SMEs. It involves the use of anchor companies toreduce risk by offering anchor contracts.

l FINEP Innova Petro: aimed at the development of SMEs that provide innovation solutions.

Source: Petrobras

Case studiesStrategic and substantial investments with a long-term horizon

Strategic and substantial investments with a long-term horizon

n CASE STUDY: CROSS-INDUSTRY DEMAND AGGREGATION TO CREATEIN-COUNTRY VALUE

The experience of Oman in designing its In-Country Value (ICV) Blueprint Strategy for the oil andgas sector can serve as an example to illustrate the design of collaborative strategies. An ICVCommittee chaired by the Undersecretary at the Ministry of Oil and Gas (MOG), with theparticipation of the Ministry of Manpower, Supreme Council for Planning as well as upstream,midstream and downstream industry CEOs, was set up in 2012 to develop a sustainableapproach to local content in conjunction with Oman’s 2020 Vision.

The ICV Committee was supported by two subcommittees: the Contract and Procurementmanagers’ subcommittee focusing on business-related opportunities covering the local sourcingof goods and services (supply chain elements); and the HR managers’ subcommittee focusingon human resources development for the industry.

The ICV Committee commissioned a study to diagnose the current market situation and identifythe gap between supply and demand in the sector, in goods, services and ‘Omanization’ of theworkforce. The gap analysis led to the identification of opportunity areas for in-country valuecreation in the oil and gas sector between 2013 and 2020. They cover different areas, rangingfrom supply chain development and local employment opportunities to cross-industrydevelopment opportunities. Specific initiatives were then defined in order to tap into theseopportunities. These included around 53 local supply chain/business opportunities, a localworkforce development programme to create around 50,000 new jobs including training

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requirements and more than 40 cross-industry enabling initiatives across six dimensions (humanresources, technology and innovation, business development, capital and finance, contractingand tendering, legislation and process improvement).

The common denominator across all opportunities is ‘International Standards’: new goods andservices supplied to international standards and new training programmes set to internationallyaccredited training standards. The results of the analysis fed into the Oil and Gas Blueprint ICVStrategy which set the objective of increasing ICV in the Omani oil and gas sector from thebaseline 18% level to 32% by 2020. This objective is expected to be achieved throughOmanization of skilled contractor personnel and increasing in-country spending on Omanimanufactured/provided goods and services.

A five-phase approach for the implementation of the ICV Strategy was adopted:

l 2013–2014: anchoring the ICV Strategy focusing on defining the execution model,implementing ICV key performance indicators (KPIs) and leveraging on quick wins.

l 2014–2015: boosting the ICV Strategy through securing high-impact opportunities andimplementing mid- and long-term initiatives.

l 2015–2016: refining the ICV Strategy based on lessons learnt and in-depth analysis, andimplementing remaining initiatives.

l 2016–2018: capitalizing and sustaining the ICV Strategy through systematization of toolsand processes, identification of new opportunities, etc.

l 2018 and beyond: towards organic ICV development.

Source: Policy Dialogue on Natural Resource-based Development and the website of Oman’s In-CountryValue Development Programme

n CASE STUDY: CROSS-INDUSTRY R&D COLLABORATION

In order to contribute to the Kazakh government’s innovation agenda, a range of internationalresource developers, jointly with KazMunayGas (KMG) and the Kazakhstan Institute of Oil andGas, initiated a Kazakhstan upstream oil and gas technology and R&D roadmap project. Theproject brought together more than 300 industry representatives to achieve a collective visionfor technological development. This provided an opportunity for Kazakhstan’s R&Dorganizations to interact directly with resource developers and service companies throughoutthe country and to share knowledge and experience, and develop a better understanding of thetechnology challenges faced by industry.

The roadmapping project began in 2010, when Shell led a technology mapping exercise for theupstream oil and gas industry in Kazakhstan. Central to this exercise was the organization of aworkshop bringing together more than 150 experienced professionals from industry,government and academia. Their work led to a list of 15 prime challenges in five technologytarget areas; 50 main potential solutions were also identified. These challenges and solutionsform the foundation of the roadmap.

Case studiesStrategic and substantial investments with a long-term horizon

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In the following phase, a group of specialists carried out a technology readiness study aiming to:

l evaluate the global maturity of the proposed technology solutions;

l see how mature the same technology solutions were in Kazakhstan;

l assess the feasibility of implementing the solutions in Kazakhstan;

l highlight issues that might hinder implementation; and

l estimate the amount of time necessary to put solutions in place.

Further valuable inputs on the main technologies already being applied in Kazakhstan’s oil andgas fields also contributed to the study. Universities were engaged so as to have theircapabilities assessed in order to identify opportunities for greater collaboration and explorepotential initiatives designed to support that development.

The final phase of preparing the roadmap involved convergence and filtering all the informationto develop a guidance for senior policymakers in Kazakhstan, in terms of the most effectivenext steps and what actions to take.

Source: Shell

n CASE STUDY: CLUSTER INITIATIVES FOR WORLD-CLASS SUPPLIERDEVELOPMENT

Chile provides an example from the mining industry of public-private collaboration to supportlocal supplier development, despite the absence of legislative or regulatory requirements forlocal content. The Chilean Economic Development Agency (CORFO) works with miningcompanies and regional associations such as the Antofagasta Industry Association and theCorporation for the Development of the Atacama Region to develop competitive local suppliers.Initially, CORFO offered financial subsidies to large companies that participated in supplierdevelopment, requiring companies to take responsibility for the training of suppliers. Later,CORFO’s support expanded to collaborative efforts across mining companies, education andtraining institutions, NGOs and others. Below are some examples of such collaborations.

l Demand-led innovation of local suppliers: the Ministry of Mining, BHP Billiton andCODELCO established a Strategy for the Development of World Class Mining Suppliers withthe aim of moving Chilean suppliers into higher technological areas, and transforming 250firms into world-class suppliers who are recognized in Chile and abroad, export 30 percentor more of their services, and provide innovative and technologically-advanced services.CORFO committed to invest US$45 million over three years and the other partners willprovide additional funding. The World Class Suppliers’ model encourages miningcompanies to identify areas where innovative solutions could enhance operationalefficiency in their operations, and identify local suppliers who have the capacity to workon the solution. Each prioritized challenge is weighted and promoted to suppliers.Companies provide technical, managerial and financial support, help scale-up solutionsand foster internationalization.

Case studiesStrategic and substantial investments with a long-term horizon

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l Harmonization of supplier prequalification requirements and certification support: theAtacama mining cluster’s 11 mining companies and the Atacama Region DevelopmentCorporation established a collaboration of procurement and contracting professionals toharmonize supplier requirements and design a common supplier certification system tofacilitate access by local SMEs to procurement opportunities.

l Skills development: the Mining Skills Council (CCM) is a collaboration between miningcompanies and Ministries of Labour, Education, Mining and Economy to collect informationon mining skills demand, and adjust the technical and professional training supply to thedemand of the Chilean mining industry. CCM: (i) conducts studies projecting demand, supplyand human capital gaps, aiming to collect data from every mining enterprise and industrysuppliers; (ii) implements a qualification framework that explains in detail the trainingrequirements for the different occupational profiles of the Chilean metallic mining industry;and (iii) develops training packages in line with the qualification framework that are free totraining institutions.

l Mining and construction: inter-industry collaboration to develop skills: CCM and theChilean Chamber of Construction are partnering with large mining and constructioncompanies to unify criteria to define a common framework of qualifications for industrialtrainers; and to develop skills profiles of common value chains and their curricularrequirements.

Source: CORFO, BHP Billiton, Fundacion Chile

n CASE STUDY: COMMON USE INFRASTRUCTURE

The Australian Marine Complex (AMC), located in Western Australia, was established as a centrefor excellence for manufacturing, fabrication, assembly, maintenance and technology servicingfor the oil and gas, marine, defence and resource industries. The AMC was developed toenhance the opportunities created by the clustering of industries, and provides companies witha Common Use Facility for the fabrication and assembly of offshore oil and gas modules.

The Subsea Cluster, a 20-hectare site dedicated to companies is home to Chevron Australia andother major suppliers to the industry. The facility also houses the Australian Centre for Energyand Process Training (ACEPT), located within the AMC Technology Precinct, a provider ofprocess operations training for the Australian oil and gas, mineral and chemical processingindustries.

The initial investment in 2003 by State and Australian Governments has been successful instimulating significant additional private sector investment.

Source: www.australianmarinecomplex.com.au

Case studiesStrategic and substantial investments with a long-term horizon

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n CASE STUDY: ONLINE DATABASES LINKING LOCAL BUSINESSES TOCONTRACT OPPORTUNITIES

ProjectConnect is a service provided by the Chamber of Commerce and Industry of WesternAustralia, a not-for-profit, member-driven organization. ProjectConnect is an online service thatlists project opportunities, with the purpose of connecting Australian businesses either in findingsuppliers or identifying new business opportunities.

The service is intended to enable businesses of all sizes to become involved in major projectwork, from prime contractors to small subcontractors. Contact details of companies that havebeen awarded work on projects are also published online, which promotes transparency andextending the development of networks.

All the information on the ProjectConnect system is available free of charge. There is also nocharge for businesses to create a company profile, register interest in project opportunities andaccess contact information of contract winners.

Oil and gas resource developers create project listing pages on the site, which contain overviewand background information about the project. The project is structured into multiple sub-projects where opportunities are listed. For each opportunity, potential suppliers can selecteither a ‘Full Package’ or ‘Component of Package’. The Full Package is for suppliers that havedemonstrated in-house capacity to provide the complete item and want to be considered forthe full tender. At the closing date, all expressions of interest are contacted to provide furtherdetails of capabilities, local content and experience. The project will select those suppliers thatmeet their criteria to take part in a formal tender. From this point until the package has beenawarded, ProjectConnect will not be involved in the process. The Component of Package is forsuppliers that are interested in providing components or subcontract services to the successfulfull package tenderer. On the site, these businesses provide a brief description of thecomponents or services they want to provide. At the completion of the tender phase, thesuccessful tenderer will be listed on the system. ProjectConnect supplies the profile of thesebusinesses to the successful tenderer and will alert them of the tender award. Businesses canalso obtain the contact details for the successful tenderer through ProjectConnect, if they wishto make contact and discuss possible opportunities.

Source: www.projectconnect.com.au

Local content performance management

Case studies

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n CASE STUDY: CORPORATE CENTRE OF EXPERTISE

The National/Local Content Center of Expertise provides for consistency and efficiencies acrossthe Chevron global enterprise in the application of local content processes, tools, best practices,and measurements. The internal service delivery model provides subject matter expertise,guidance and best practices, both inside and outside of Chevron, from a Corporate Center andthrough the following channels:

l SharePoint Site: houses the National/Local Content standardized process, toolkits, successstories, and metrics.

l SME Support: provides strategy and sourcing consultations, concept papers and scopes ofWorks, and industry best practices

Source: Chevron

n CASE STUDY: MEASURING THE ECONOMIC IMPACTS OF LOCAL CONTENT

The SELCE (Saipem Externalities Local Content Evaluation) Model was developed to measure aquantitative evaluation in monetary terms of socio-economic effects produced by local content.The tool uses the multiplier approach to measure direct, indirect and induced socio-economicimpacts generated by Saipem Operating Companies in the countries in which they are based.Three main categories of impact are identified and quantified:

l Economic value created, in terms of locally sourced purchases, taxes paid to local authoritiesand employees’ salaries.

l Employment created.

l Human capital development, including increased life-time earning expectancy due to thetraining received from the company.

For each category, the total impact (given by the sum of direct, indirect and induced impacts)and the multiplier factor (i.e. numbers providing the magnitude of an impact) are calculated. Thismethodology has been applied to different areas where Saipem operates, for example in Angola,Peru, Kazakhstan, Nigeria, Algeria, France, Saudi Arabia, Brazil, Canada, Australia and Indonesia.

Source: Saipem

Case studiesLocal content performance management

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IPIECA is the global oil and gas industry association for environmental and social issues. It develops, shares andpromotes good practices and knowledge to help the industry improve its environmental and socialperformance, and is the industry’s principal channel of communication with the United Nations.

Through its member-led working groups and executive leadership, IPIECA brings together the collectiveexpertise of oil and gas companies and associations. Its unique position within the industry enables its membersto respond effectively to key environmental and social issues.

MEMBERS

AnadarkoBashneftBHP BillitonBPChevronCNOOCConocoPhillipsEDFEniExxonMobil HessHunt OilHusky Energy

IPIECA also has an active global network of oil and gas industry associationmembers. Please refer to the IPIECA website for a full list.

INPEXKPCMærsk MarathonNexenNoble EnergyNOC LibyaOccidentalOMVPemexPetrobrasPetronasPetrotrin

PTT EPRepsolSantosSaudi AramcoShellSNHStatoilTotalTullow OilWoodside Energy

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